The economics of bringing a case in the ERA with current backlog – by Tristam Price

Steve Kilgallon’s 26 April article on the ERA’s huge backlog of cases has set out the impact employment lawyers and advocates say that backlog is having on their clients.

It’s generally agreed that Covid-19 has been a significant factor in the blowout. In this article we look at the implications for claimants whose claims were not directly attributed to Covid-19.

A snowball effect was created by:

  • Redundancies without due process

  • An increase in the number of procedural / investigative determinations, as opposed to actual decisions on the case

  • Employers getting away with conduct that they wouldn’t have got away with before, taking advantage of delays, and where the dispute is referred to mediation, being able to settle for a lower figure than they would have previously

  • Increased likelihood of small businesses being liquidated by the time an ERA determination is made.

  • Increased costs overall, as the ERA processes have become more complex and legalistic.

There are also delays in getting a dispute into mediation.

Bringing a claim has always been risky for an employee – if they are unsuccessful they are often ordered to pay some of their former employer’s legal costs which are currently $4,500 for a one day Investigation Meeting.

So if mediated settlements are going to be lower, and the time spent preparing submissions has increased, and resolution in the ERA is going to be significantly delayed if mediation fails, then employees with a grievance are going to have to take care of themselves.

Employees will miss out on awards they might have otherwise got.

But the backlog is not all good news for employers involved in a dispute.

Employers may suffer reputational harm. Those who previously relied on being able to buy a non-disparagement and/or non-disclosure agreement in mediation are more likely to find that option harder to achieve. Some may push their luck with lowball settlement offers or overreaching NDAs, perhaps with indemnity clauses. A departing employee would be more likely to walk out of mediation and grudgingly “write off” what they believe they are owed, then use their unfettered right to free speech to disparage their former employer, with the audience including the employer’s competitors.

The confidentiality of trade secrets might also fall by the wayside. While the ERA would probably continue to grant urgency where an employer has alleged that a former employee has misused confidential information, even if they manage to get a Compliance Order they would face similar delays in getting to a substantive hearing, by which time the dispute may have become stale.

We believe there would be no discernible effect on lawyers’ and advocates’ revenue as a similar amount of billable work will be getting done.

We will be interested to see whether there is increased uptake in MBIE’s new Early Dispute Resolution service which is yet to gain traction.

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